Saturday, April 16, 2011

Federal Reserve Official Outspoken on Inflationary Effects of Quantitative Easing

There is at least one Fed official who can see the light beyond the shadowy gloom of the Federal Reserve's liquidity operations. Thomas Hoenig, FRB President of Kansas City, has been an outspoken dissident among the reigning policy chiefs. His position in the nation's farm belt has given him a much clearer view of the inflationary effects of the central bank's actions on food and fuel prices. On Friday afternoon, he noted with dismay the surging land price of farm land and agricultural commodities.

"We can extend the boom, and make the bust more difficult," Hoenig said at a panel discussion on food prices at Purdue University.

He said that interest rates can't stay near zero forever, and that investment in farmland is "gambling."

Hoenig, scheduled to give a lecture later Friday, also said that worries about inflation should extend beyond the core Consumer Price Index, which doesn't include food or energy.

"I think it is an error to look at just core inflation, except for a very short period of time," he said.

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